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VaxGen Delays Filing Again

The company also raises the possibility of an earnings restatement.

VaxGen (VXGN)

said Monday that it is examining its revenue recognition policy regarding certain government contracts for medical research and will delay filing its quarterly report with regulators for the second time in a week.

The company also said that if the policy is changed, it would have to restate earnings for the fourth quarter of 2002 and all of 2003.

The news sent the company's stock down 40 cents, or 2.4 %, to $15.96 in Monday trading.

The announcement follows the Brisbane, Calif.-based company's report last week that it was seeking a five-day delay in the filing of its first-quarter 10-Q 2004 financial report with the

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Securities and Exchange Commission

because its new independent auditor needed more time to evaluate corporate records.

VaxGen said the revenue recognition policy for contracts with the National Institute of Allergy and Infectious Diseases (NIAID) has been discussed in investor conference calls since February 2003. The company, which is working on vaccines to combat anthrax and smallpox, recognizes NIAID contract revenue only after completing contract milestones. The company is examining whether it should recognize revenue from these and other similar contracts as it incurs costs related to these contracts.

Any restatement due to a change in revenue recognition policy "would accelerate the recognition of revenue, and would result in a material decrease in the net loss applicable to common stockholders and an increase in revenue for the combined periods," the company said Monday.

"The restatement would relate solely to VaxGen's revenue recognition policy and the treatment of related costs," the company said. "VaxGen believes there are no issues related to the validity of any invoices already submitted or paid; nor would there be any effect on the way VaxGen invoices the NIAID for work completed" under two existing contracts.